The IEA, part of the Organisation for Economic Cooperation and Development (OECD), said world demand for oil was set to rise by three million barrels per day in the last three months of the year, to 78.4 million barrels per day.

It said that the use by the US of its strategic oil reserves and Saudi Arabia's commitment to produce more oil had helped bring the price of a barrel of oil down from $38 to $30 in the past month.

Physical limits

The IEA's forecast - not expected to do anything to help lower the oil price - is for demand in Asia to grow by 1.4m barrels a day, by 1m per day in Europe and 400,000 per day in North America.

The report, added to continuing uncertainty caused by Middle East tensions, led to the price of a barrel of benchmark Brent crude for November delivery jumping by more than 70 cents to $31.50 in London trading on Tuesday morning.

"Refineries can only process so much crude; ships, barges and pipelines can only transport so much product," the agency said.

"The global energy market is coming to grips with the reality that there are physical limits on what can be accomplished before the winter."

The IEA was set up in the 1970s to try and guard against any future oil shocks.

Members are required to hold a minimum of 90 days' worth of imports.

The IEA report said OECD oil inventories fell to 2.569bn in August, 151m barrels lower than August 1999 and 247m lower than in August 1998.